OGDC gets $28m payment in circular debt settlement

August 26, 2025 (MLN): Oil & Gas Development Company Limited (PSX: OGDC) has received its second monthly payment of Rs 7.725 billion ($28 million) from Power Holding Private Limited as part of an ambitious government-backed circular debt resolution mechanism.

This development marked the second of twelve equal monthly instalments totalling Rs 92bn ($330m) that commenced in July 2025.

The structured settlement represents a critical component of Pakistan's broader strategy to address the country's crippling circular debt crisis that has plagued the energy sector for over a decade.

Key Developments:

• Payment Schedule On Track: Second consecutive monthly payment received as planned
• Total Commitment: Rs92bn ($330m) to be paid over 12 months
• Government Backing: Settlement operates under approved GOP mechanism
• Market Impact: Demonstrates progress in resolving energy sector liquidity issues

The circular debt phenomenon has been a persistent challenge for Pakistan's economy, with power companies unable to pay fuel suppliers like OGDCL, creating a domino effect of unpaid bills throughout the energy value chain.

The current settlement mechanism through Power Holding Limited represents the most structured approach to date in addressing these systemic payment delays.

Pakistan's circular debt reached alarming levels in recent years, with the power sector owing billions to upstream oil and gas companies.

OGDCL, as a key supplier to the national grid, has been significantly impacted by these payment delays, affecting its cash flow and operational capabilities.

The company's disclosure to the Pakistan Stock Exchange (PSX), London Stock Exchange (LSE), and Securities & Exchange Commission of Pakistan (SECP) underscores the materiality of these payments for shareholders and market participants.

For OGDC shareholders, the structured payment plan provides:

• Predictable Cash Flow: Monthly installments create revenue visibility
• Reduced Receivables: Systematic reduction of outstanding government dues
• Operational Flexibility: Improved liquidity for exploration activities
• Market Confidence: Demonstrates government commitment to sector support

The energy giant's ability to collect these payments will be closely watched by investors as a barometer of the government's resolve to tackle the circular debt crisis that has historically undermined Pakistan's energy security and economic stability.

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